Why the government ought not to intervene with Amul

Source– The post is based on the article “Why the government ought not to intervene with Amul” published in The Indian Express on 16th January 2023.

Syllabus: GS3- Marketing of Agricultural Produce and Issues and Related Constraints

Relevance– Marketing of animal husbandry products

News– The article explains the difference between cooperative and company. It tells about Gujarat Cooperative Milk Marketing Federation and reasons for its success. It also raises question marks on Sodhi’s recent exit as MD of GCMMF.

What is the difference between cooperative and companies?

Companies– They are investor-owned entities. They exist primarily to maximise their return on capital. The investors main goal is capital appreciation and the highest possible price for the shares.

Cooperatives– They are organisations owned by members. They could be producers or consumers. These members may own shares. But, they value the cooperative mainly for the services provided by them.

Success in this case does not depend on earnings per share. But the procurement price of produce and the timeliness of payment or the provision of quality cattle feed, farm extension and animal healthcare support, fertilisers and credit at least cost decides the success of the venture.

What is Gujarat Cooperative Milk Marketing Federation and how it has benefited the farmers of Gujarat?

It is apex organisation of dairy cooperatives in Gujarat. It is owned by 36.4 lakh farmers pouring milk to 18,154 village-level societies across the state.

Between 2001-02 and 2021-22, GCMMF’s sales turnover rose from Rs 2,336 crore to Rs 46,481 crore.

In the last 20 years, the average procurement price paid to producers by GCMMF has gone up from Rs 184 to Rs 820 per kg of fat.

The producer’s share is over 80% in the price paid by consumers. It means farmers are getting the highest possible share in the consumer rupee.

What are the main reasons behind the success of Gujarat Cooperative Milk Marketing Federation?

The main reason is professional management. The Amul organisational model has been based on an elected board of directors. They operate through a chief executive and his team, which include marketing and finance professionals, project engineers, veterinarians, agronomists and nutritionists.

This model has made GCMMF different from other state dairy cooperative federations. Their managing directors are usually IAS officers. They report to secretaries of animal husbandry and dairying departments. It makes boards and their managers non-accountable to farmers.

Why is the recent exit of the current MD raises some disturbing questions?

There is a long established tradition that political calculations will not impact the business operations of the cooperative.

There were reports that the decision to remove him was taken at a political level. It reduces GCMMF to a government departmental undertaking and with a board that’s neither independent nor accountable to farmers

During his 12 years as MD, GCMMF’s turnover went up nearly six times. The federation also began procuring from farmers in other states.